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December 14, 2017

GOP reaches tax deal that would scrap individual mandate penalty

Daily Briefing

    White House and Republican sources on Wednesday said Republicans in the House and Senate have reached an agreement in principle on a tax reform bill that includes a provision to eliminate the Affordable Care Act's individual mandate penalty, sources told the New York Times

    Here's your cheat sheet for understanding health care's legal landscape

    Bill details

    Lawmakers have not yet released legislative text for the final bill. However, GOP sources familiar with the agreement say the final bill overall would lower the top individual tax rate to 37%, down from the current rate of 39.6%, and lower the corporate tax rate to 21%, down from the current rate of 35%.

    Sources say the final bill also will include some provisions related to health care. For instance, Senate Majority Leader Mitch McConnell (R-Ky.) on Wednesday said it will eliminate the ACA's individual mandate penalty, Bloomberg reports. In addition, sources tell Bloomberg that the bill would for two years allow individuals to deduct medical expenses that exceed 7.5% of their adjusted gross income, after which the threshold would rise to its current level of 10%. The House's tax reform measure would have eliminated the deduction entirely.

    The final bill also is likely to include some provisions that are not directly related to health care, but that could affect the health care industry. For instance, sources say the final bill will set a deduction for pass-through business income at 20%. In addition, sources say the bill will preserve certain tax-exempt bonds that hospitals often use for construction, which also would have been eliminated under the House's tax reform bill. According to sources, the bill also will implement a 12.5% tax on income U.S. companies generate from intellectual property, regardless of whether that property is housed in the United States or in another country—a provision included in the Senate's tax reform bill that observers say is partially aimed at drugmakers.

    According to Politico, a GOP aide said lawmakers plan to release details on the final bill by the end of this week.

    Where lawmakers stand

    Both the House and Senate would have to approve the bill before it could be sent to President Trump. According to NBC News, a White House official said lawmakers will aim for the Senate to hold the first vote on the bill early next week, with the House voting by Wednesday of next week.

    According to The Hill, Senate leaders have said they have enough votes to pass the legislation. "I'm confident we'll pass the bill next week," Senate Majority Whip John Cornyn (R-Texas) said, adding that he expects the Senate will hold a final vote on the bill Tuesday.

    Republicans currently hold 52 seats in the Senate. Senate leaders will seek to advance the tax reform bill through the budget reconciliation process, which allows certain bills to pass the Senate by a simple majority of 51 votes without being subject to a filibuster. Under that process, Republicans currently can afford to lose only two votes—if all Democrats vote against a measure—with Vice President Pence casting a tie breaking vote. Democrats are urging their Republican colleagues to slow down and wait to vote on a final tax reform bill until 2018, when Alabama's new Senator-elect, Democrat Doug Jones, is likely to be sworn in, but Republican leaders have said they plan to proceed with votes next week.

    Sen. Susan Collins (R-Maine), who has expressed concerns about eliminating the individual mandate penalty, on Wednesday said she would have to "wait and look at the" final bill once it is available before deciding how she would vote on the measure. However, according to The Hill, GOP leaders in Congress and the Trump administration have "helped win over Collins by promising" to enact legislation intended to bolster the ACA exchange market. Following a meeting Collins had with Pence on Tuesday, Collins said, "I feel certain the agreement that I negotiated will be kept—this year."

    According to Reuters, Sen. Bob Corker (R-Tenn.), who voted against the Senate's version of the tax reform bill earlier this month, on Wednesday expressed apprehension about how much the final bill would add to the federal deficit, saying, "My deficit concerns have not been alleviated."

    Sen. Jeff Flake (R-Ariz.) also seemed undecided on the bill Wednesday, though he did not provide details as to why, Reuters reports.

    According to Politico, Sen. Marco Rubio (R-Fla.) on Wednesday also indicated that he was unsure of whether he would vote for the bill, citing concerns about changes to the child tax credit (Bolton/Wong, The Hill, 12/13; Bloomberg, 12/13; Tracer/Rausch, Bloomberg, 12/13; Alexander et al., NBC News, 12/13; Mascaro, Los Angeles Times, 12/13; Morgan/Becker, Reuters, 12/13; Bryan, Business Insider, 12/13; Faler/Min Kim, Politico, 12/13; Baker, "Vitals," Axios, 12/14; Rubin, Wall Street Journal, 12/13; Tankersley et al., New York Times, 12/13).

    Here's your cheat sheet for understanding health care's legal landscape


    With MACRA, HIPAA, the ACA, and countless others, the health care landscape has become an alphabet soup of legislation. To help you keep up, we've created a series of cheat sheets for some of the most important—and complicated—legal landmarks.

    Check them out now for everything you need to know about the Affordable Care Act, antitrust laws, fraud and abuse prevention measures, HIPAA, MACRA, and the two-midnight rule.

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